MCX: Riding the bullion wave. Maintain BUY

MCX continues to present a compelling growth story built on its earlier drivers—new product launches, a robust product pipeline, tech upgrades, and rising participation. As we had highlighted in our earlier report “The new gold standard,” gold and silver were expected to emerge as major contributors to options premium, and this trend is firmly on track and gaining strength. Options premium ADTV (Average Daily Traded Value) has witnessed strong growth, jumping to ~INR 67bn in October 2025 vs INR 41bn in Q2FY25, led by surging gold and silver volumes, which now account for ~60% of total notional volume and ~30% of premium ADTV. The bullion contracts have scaled rapidly post the shift to monthly expiry, gaining traction and diversifying the revenue mix. We believe bullion could reach ~40% of total premium by Q4FY27E, materially reducing earlier concentration risk from crude and natural gas contracts (~85% share previously).

The upcoming launch of cash-settled index contracts such as Metldex and Bulldex is expected to generate growth thrust and attract higher participation from FPIs and institutions. Importantly, SEBI’s indication to allow FPI and domestic institutional participation in non-cash settled commodities is a positive step, especially given MCX’s current FPI volume share of only ~3% versus ~20% for equity exchanges. Additionally, the co-location facilities in commodities could pave the way for HFT activity, which has been a significant volume driver in equity markets. These developments amplify our earlier thesis of sustained options growth, supported by both product innovation and structural market reforms, and strengthen our conviction on MCX’s medium-term earnings trajectory. We expect notional/premium ADTV to register a +62/33% CAGR resulting in revenue/PAT CAGR of +27/33% over FY25-28E. We increase our revenue and EPS estimates by 7-9% and increase the multiple to 46x vs 45x earlier. We maintain BUY with a target price of INR 10,000, based on 46x Sep-27E core EPS and adding cash excluding SGF and trading margin.

Options premium growth driven by bullion: The options notional at INR 4.5trn has increased 2X YoY in Sep-25, led by 7x rise in gold and 37x rise in silver ADTV while the crude ADTV is down 18% YoY. MCX revamped its gold and silver options contracts by introducing monthly expiries and smaller-sized contracts. These changes combined with the rise in gold and silver prices and higher volatility has led to a surge in volumes. The gold notional ADTV clocked INR 1.7trn and premium ADTV of INR 8.28bn in Sep-25 vs notional/premium ADTV of INR 0.31trn/1.39bn, which is 37/18% of total notional/premium ADTV. Similarly, the silver notional/premium ADTV clocked INR 1.02trn/5.69bn in Sep-25. The gold and silver P/N is 0.5%/0.6% vs 1.6%/2.8% for crude and natural gas. The P/N of new contracts is generally low initially and gradually goes up when contracts mature. The bullion options’ notional/premium ADTV increased from 20/8% of total ADTV in Q3FY25 to ~60/30% in Sep-25. We expect the bullion premium ADTV to reach ~INR 25bn in FY27E exit, which is ~40% of the total premium. The increase mix of lower P/N bullion contracts will drag the aggregate P/N, and the blended P/N will fall to 0.90% in FY27E vs 1.63% in FY25.

Q2FY26E – Soft quarter: MCX is expected to report revenue of INR 3.75bn +0.4%/31.2% QoQ/YoY. The options and futures revenue will be INR 2.23/1.14bn -2.0%/+4.6% QoQ. The EBITDA will be at INR 2.43bn and margin of 64.8% flat QoQ. The PAT for the quarter is expected at INR 2.01bn, up 31% YoY but down 1.1% QoQ. The volume has surged significantly in Oct-25, but we have assumed options ADTV of INR 5.2trn and premium ADTV of INR ~50bn for Q3FY26E vs the Sep-25 notional ADTV of INR 4.5trn and premium ADTV of INR 47bn.

Valuation and view: MCX is up ~14/40% in the last 1M/1Y and is trading at a P/E of 42x FY27E, which is a ~10% premium to BSE. Historically, MCX has traded at a ~15% premium to equity exchanges based on the optionality and lower regulatory risk related to weekly options. The rising volumes, stable tech platform, regulatory tailwinds, and the option value linked to the launch of new products have resulted in outperformance, which we believe will continue. The stock has traded at an average one-year forward P/E of ~45x and is currently trading at a P/E of 51/42x FY26/27E EPS. We have assigned core P/E multiple of 46x and the implied P/E multiple on Sep-27 EPS is ~43x.

Disclaimer : This content is only for informational purpose. Do not make any investment based solely on this recommendation as it is not based on your unique risk tolerance or investment objectives.

Source: HDFC Securities Institutional Equities

To see full report and full disclosure, click on: https://www.hdfcsec.com/hsl.docs/MCX%20-%20Update%20-%20Oct25%20-%20HSIE-202510131353275574621.pdf?t=1310202514110662